Executive Summary
This paper seeks to explain how Zara Company carries out its operations across all its stores in the globe. The paper also focuses on the possible threats that the company might encounter from potential competitors. It also analyses both the internal and external environment of the company.
Introduction
Zara Company is a worldwide business entity that deals with retailing of clothing materials across the globe. The company has its own headquarters at Italy. The company’s stores are distributed at nearly every single country across all the continents in the world. This allows for easy access to products by the customers. This company deals with the trending fashion industry. It produces its products depending on the available design or fashion style in the market. This gives it its unique taste, and more preferences by the customers.
The prices of products at this company are quite affordable. It ranges from $14-$300 depending on the type of product and the material used. This price is quite affordable for most middle income earners and does everything to ensure that they retain magnificent status in the market. This company offers several set of products to potential customers. These products include; shoes, clothes (any type of clothing) to furniture ware. The main product that sells quite well in the company is shoes. Men shoes are demanded heavily by most men around the globe. This is due to the unique feature of their shoes that allow the fashion and quality to be maintained at an optimum level.
The management uses the social sites to market its products. The company has opened a Facebook page that allows the client to link up directly with the retailers within the company and get its goods in a mush effective manner. This allows for greater market dominance by the firm over potential competitors. Online marketing tool also assists the company to attract more customers through the provision of first-hand information through the various social sites (Bjork, B9).
Internal Analysis
Company Background Information
Zara is a constituent company of Inditex. Inditex began its operation in the year 1963. It began its operations simply as a dress making company. In the year 1975, Zara opened up a new store in La Coruna ,in Spain, this was twelve years since Inditex came up as a textile making industry. In the year 1976-1983, the company witnessed the opening of nine new stores across the Spanish nation after giving a try on the fashion industry. Its temporary headquarters was set to be at Goa.in the year 1984; the inauguration of the first logistics Centre was established at Arteixo, this measured a total of ten thousand meters. Later on, the year 1985-1987 witnessed the establishment of Inditex as the group holding company. This was mainly to allow Zara Company to operate independently in the market but under their watch. Later on, the year 1988, witnessed the first opening of a fashion store in Portugal by a Spanish clothing line. Zara then grew from a national recognition to a regional recognition. Inditex followed suit by opening up a store in France in the year 1990.
In the year 2001, the company began trading its shares to the public. This was followed by rapid expansion into the global market by the company. They took advantage over the potential competitive threat by the new market entrants. In 2013, the Inditex group rolled out new brand images that were accepted widely by consumers across the globe (Kishel, 1149). This can be justified by the increased number of purchases before and after the change.
Present Sales Figures
The company produces an annual sales capacity of eight hundred million garments; all these garments are retailed at $9 each. This translates to $7.2 billion profit before tax (Roman et al, B3). All these figures are a result of the company restructure and reshaping. This allows the company to take advantage of the wider market over its competitors.
Marketing Mix
Product
The product that the company produces is tested for efficiency and durability. A special research and development team explores all these factors across the various products that the company produces (Tagliabue, W1). The durability of its products is guaranteed and most consumers purchases products that are durable
Price
The price of its products is fixed in a manner that both the middle income earners and the well-off in the society can afford these products. There is no class in the society that is discriminated against. All of them are accommodated into this gap. The prices range from $9 to $300 depending on the material and type of the product.
Promotion
The company has an annual promotion plan during the festive seasons. The company offers free products that are bought for every three purchases of the same product. The company witnesses a major influx of revenue during this period as most of the consumers are interested with the offer.
Place
The company has a global network. Its operations are widely spread across the globe. All these networks are established at strategic locations where customers can access the products easily. Most of the stores are located in malls across the major cities of the world. This gives it an added advantage of carrying out its operations easily over its competitors.
External Analysis
Technology
Zara Company uses the modern technology across all its chain of production. Straight from the raw materials to finished products. The company appreciates the revolutionary technology that allows all production procedures to be undertaken smoothly. This provides utmost efficiency and quality products for the company thus encouraging the growth of the company and hedging out of any potential competitors. Technology helps the company develop a definitive technique of monitoring all its branches across the globe (Caro et al, 84). The number of daily of sales can be known with certainty through the use of the modern technology. Modern technology comes with a package of establishing and monitoring all the freight goods that are shipped overseas. This will allow sealing of possible theft by goons.
Economy
The current global economy allows the company to make good profits. Financial crisis due to economic factors like inflation affects the smooth trading options of the company. A perfect example is the European economic crisis of 2009; this affected the sales of the company by half. The company did retail a total of $2.4 billion of the total products sold. This can be attributed to the economic factor that lowers the maximum realization of profits.
Demand of these goods from the company is another factor that affects the company output negatively. During the low seasons of the year, the demand for its products runs low. The consumers of these goods demand less hence causing an imbalance on the huge supply. This affects the sales thus affecting the internal operations of the firm.
Government Policy
Given the fact that the company has various branches across the globe, different governments have different modules of operations. Government policies, for instance, taxation, affects the company’s sales negatively. Taxation is a cost that imposed on any government that carries out operations in any economy. Taxation can vary from one economy to the other. A perfect example of taxation that affects the company’s sales is the foreign tax. This is a tax that is imposed on a foreign company carrying out its operations within the given economy. This affects the sales and the maximum turnout of the company. Therefore, government policies affect the smooth roll out of profits into the company.
Socio-cultural
Socio-cultural factors can also be a dynamic factor that causes a negative impact on the company’s sales. Different regions hold different cultures. This difference in cultural affects the way people dress (Surowiecki, 74). Some cultures support a given dressing code while others abolish it. Therefore, the company’s sales are affected negatively irrespective of the timing and mode of operation.
A cultural set-up that supports an all-rounded dress code improves the company’s sales and profit influx. A cultural practice that discriminate against a given dress code by both men and women will affect the sales of the company, thus having a negative impact on the profits of the firm.
Competition
The company is facing stiff competition from the upcoming firms across the globe. One such firm is Calvin Klein (CK). This company is using different strategies to outsmart the solid market dominance of Zara Company. These strategies include; the competitor is reducing the price of its products so that it can develop a market base. Another strategy is the targeting the teenagers in their clothing line; teens loves trending fashion, therefore, CK is using this opportunity to take advantage over the company.
Another strategy is the use of promotions through buy one get one technique and discounts. This attracts plenty of customers thus serving as a threat to this company.
Works Cited;
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"Floating On Air." Economist 359.8222 (2001): 56-57.
"Global Stretch." Economist 398.8724 (2011): 76.
"Shining Examples." Economist 379.8482 (2006): 4-6.
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Caro, Felipe, et al. "Zara Uses Operations Research to Reengineer its Global Distribution Process." Interfaces 40.1 (2010): 71, 84, 92-94, 96-97. ProQuest. Web. 14 Apr. 2014.
Kishel, P. G. "Fashion Brands: Branding Style from Armani to Zara." Choice 46.6 (2009): 1149. ProQuest. Web. 14 Apr. 2014.
Kumar, Nirmalya, and Sophie Linguri. "Fashion Sense." Business Strategy Review 17.2 (2006): 80. ProQuest. Web. 14 Apr. 2014.
Roman, David, and William Kemble-Diaz. "Owner of Fast-Fashion Retailer Zara Keeps Up Emerging-Markets Push." Wall Street Journal - Eastern Edition 14 June 2012: B3.
Surowiecki, James. "The Most Devastating Retailer in the World." New Yorker 76.27 (2000): 74.
Tagliabue, John. "A Rival to Gap That Operates Like Dell." New York Times 30 May 2003: W1.
